Top 5 Things to Consider for Pre-Paid Legal Plans

As small businesses and individuals often find out too late, the cost of legal services is very high. There are many reasons for this such as the fact that the legal profession requires a license, law is very specialized and complex, and the work often involves very personal and high stakes issues with high stress levels and large liability concerns.

Lawyers are hired to help and protect clients with extremely important issues that have large ramifications. Lawyers have to bring to bear their special knowledge and skill for the best interests of their clients. While there are exceptions, the high cost of the legal services in the marketplace often reflects the magnitude of the responsibility lawyers undertake for their clients.

Unfortunately, the cost of legal services often works to prevent many people from being able to afford the help they need. One attempt to respond to this problem has been the creation of pre-paid legal services.

The idea of pre-paid legal is that an ordinary person can pay a more manageable monthly fee to a pre-paid service provider who then gives that person access to some legal services at no, or low, additional cost. In considering such an option, there are several things one should consider.

1. You Already Have a Kind of “Pre-Paid Legal” for Some Things

Pre-paid legal is not really new. When you buy an insurance policy for your automobile, or for your business’s property or general liability, the policy contract generally provides two things. One is that your liability for damages due to a covered loss will be paid by the insurance carrier. The second is that the insurance carrier will pay for the legal costs of defending against a covered claim. In other words, if you are sued because you crashed your car into another person, the insurance hires an attorney to represent you and pays the cost of the attorney as well as any settlement or judgment that results, so long as it is covered by the terms of the policy.

This works fairly well for a few types of situations. The idea is that people pool their resources with the insurance carrier who then covers the unintended mistakes people make on a fairly infrequent basis. Some people will never have an accident while paying a lot of premiums, while another person will have large losses in an accident while paying only a few premiums.

When we switch to the idea of pre-paid legal within the context of non-accidents such as wills and estate planning, disputes over contracts, cease and desist letters for intellectual property violations, or setting up a company, the type of situation being “covered” is different. These situations are the products of intentional decisions and strategies of the people involved and are not “accidents.”

2. Pre-Paid Legal is Limited, Perhaps Very Limited

Pre-paid legal services only cover certain things as a part of a plan. It may cover a will, a collection letter, of a consultation with a lawyer on some issues. It may even cover some litigation situations with an hourly limit. While, this may be all that some people want or need, these things are most often only the tip of the actual legal needs a person has. For example, a consultation for 30 minutes generally results in a determination of whether the person has a legal problem, it does not solve the problem. A collection or cease and desist letter very rarely results in compliance – the real legal tools are the threat of a lawsuit to enforce legal obligations. The covered will, business formation documents, and so on are generally the simplest and least customized form one can obtain.

The real value of legal services comes into play when clients obtain what they did not have before such as tailored advice, customized solutions, evaluation of risks and options, and the formation of legal strategies.

3. Consider the Providing Attorneys Incentives

Pre-paid legal works by soliciting attorneys to accept the request for the price the service provider is offering. However, no attorney is required to take everything that comes through the door. When a member seeks to obtain services, the providing attorney has to determine whether they can, or want, do the work. You can imagine that attorneys who have plenty of work already will not be in the program. You can also imagine that attorneys who regularly do low fee work may not have other work to do. Some attorneys may have figured out a way to do the work cost-effectively, which could mean impersonal/unresponsive, form based, or factory style practices. Some attorneys may be using the work to learn or train less experienced associates.

4. The Quality of Services Will Match What is Paid

In a previous point, I alluded to the fact that while some services or documents may be covered, it is often a very simple or simplified standard document or form and does not include substantive explanation or tailoring to fit particular needs. The attorneys providing the services have to figure out a way to make the work they do match the amounts they are getting paid. This will generally mean that they have to provide standardized and very generic assistance and documents unless the member is able to afford stepped up services. The old adage that you get what you pay for remains true.

5. What You Really Need or Want Probably Costs More

Members of pre-paid services may be surprised to find out that while something is “covered,” almost all of the substantive services they actually need will be an additional cost. It is possible these services might be offered at a reduced cost than if the member did not have the plan, but it is still an additional cost.

At the End of the Day, Pre-Paid Legal is a Lead Generation Tool for Attorneys

Members of pre-paid legal services may be surprised to learn that from the legal provider’s perspective, pre-paid legal’s value is in its ability to generate leads. While the member gets some very basic services and value, the pre-paid legal services are more about increasing the inquiries into law offices so that firms can have a conversation with prospective clients about what they really need, and whether they want to pay for those additional services. This is not a bad thing. But people considering pre-paid legal need to understand that while they are getting some very basic legal-like assistance, they are also essentially a lead being passed to the pre-paid company’s network.